|[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]|
England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Thevarajah v Riordan & Ors  EWCA Civ 41 (04 February 2015)
Cite as:  EWCA Civ 41
[New search] [Context] [View without highlighting] [Printable RTF version] [Help]
ON APPEAL FROM THE HIGH COURT OF JUSTICE
MR D. DONALDSON QC SITTING AS DEPUTY JUDGE
IN THE CHANCERY DIVISION
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE TOMLINSON
MR JUSTICE NEWEY
| Thavatheva Thevarajah
|- and -
|(1) John Riordan
(2) Eugene Burke
(3) Prestige Property Developer UK Limited
(4) Barrington Burke
WordWave International Limited
A Merrill Communications Company
165 Fleet Street, London EC4A 2DY
Tel No: 020 7404 1400, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Mr Simon Davenport QC and Mr Daniel Lewis (instructed by Moon Beever) for the Respondents
Hearing date: 17 December 2014
Crown Copyright ©
Lord Justice Tomlinson:
i) Mr Thevarajah would purchase the entire issued shared capital in Prestige at which time, ie on transfer of the shares, its assets would consist of The Jewel alone- Defence and Counterclaim paragraph 11 (a);
ii) Mr Thevarajah would assume responsibility for the indebtedness referable to The Jewel. The price payable in cash for the shares in Prestige would be abated by £800,000, or whatever the level of the outstanding indebtedness to the Bank of Cyprus referable to The Jewel at the time of transfer proved to be. Interest was of course accruing on the indebtedness- Defence and Counterclaim paragraphs 11 (c), 21 and 50;
iii) The First and Second Respondents would assume liability for the borrowing associated with The Castle when that property was transferred to them- see for example witness statement dated 5 July 2013 of the First, Second and Fourth Respondent's solicitor, Mr Jonathan Fletcher at paragraph 7 to the following effect:-
"In the event that the First Claimant points to the borrowing associated with The Jewel Public House, in the region of £800,000, as being part of his claim for damages there is ample evidence within the Claimant's own papers to confirm that it had always been intended that the Claimant would take on this borrowing as part of the restructuring of the Third Defendant, with the First and Second Defendants taking the remainder of the borrowing along with the Holloway Castle public house."
i) Ordered the First, Second and Fourth Respondents to transfer to Mr Thevarajah the remaining 50% of the shares in Prestige;
ii) Ordered Mr Thevarajah simultaneously to procure the transfer of The Castle to the First, Second and Fourth Respondents or to such other person or entity as they might direct;
iii) Ordered the First, Second and Fourth Respondents to pay £72,000 to Mr Thevarajah, and
iv) Declared that Mr Thevarajah was not entitled to any further damages or payment.
(1) Specific performance of the Agreement as aforesaid; and
(2) An order requiring the First, Second and Fourth Defendants to transfer or cause to be transferred such shares as may be necessary to ensure that the First Claimant owns the entirety of the issued share capital in the Third Defendant; and
(3) £332,000 or alternatively £72,000 as aforesaid; and
(4) Further damages to be assessed; or in the alternative to (1) to (4)
(5) £1,572,000 and
(6) Further damages to be assessed; or in the alternative to (5) and (6)
(7) A declaration that First and/or Second and/or Fourth Defendants hold the sum of £1,572,000 on trust for the First Claimant together with an order for payment; and in each case
(8) Interest as aforesaid; and
(9) Such other accounts and enquiries as the court thinks fit
(10) Declarations as aforesaid in respect of the directorships, share capital and shareholding in the Third Defendant;
(12) Further or other relief.
This relief, or at any rate most of it, is not obtainable by simply filing a request for judgment. It is relief which requires the court to be satisfied, exercising its judicial function, that it is appropriate to grant it. For what it is worth, the relief sought by the four Defendants in their Defence and Counterclaim was similarly complex:-
(1) Specific performance of the Agreement as aforesaid; and
(2) An order requiring the First Claimant to transfer or cause to be transferred the Holloway Castle out of the Third Defendant to the order of the First and/or Second Defendants; and
(3) £128,000; and
(4) Further damages to be assessed; and
(5) Interest as aforesaid; and
(6) Such other accounts and enquiries as the Court thinks fit; and
(7) Costs; and
(8) Further or other relief.
"And whereas a Freezing Order was made against the First, Second and Fourth Defendants by Mr Justice Arnold dated 9th May 2013 requiring those Defendants to provide certain information among other things ("the First Order")
And whereas a further Freezing Order was made against the First, Second and Fourth Defendants by Mr Justice Arnold dated 17th May 2013 requiring those defendants to provide certain information among other things ("the Second Order")
It is ordered that:
Without prejudice to the effect of, and the obligations imposed by, the First and Second Orders generally, unless each of the First, Second and Fourth Respondents do provide the information particularised immediately below by 4pm on 1st July 2013 then the First, Second and Fourth Respondents shall be debarred from defending the Applicants' claim and any Defence that they might have filed shall be struck out.
1.1. Details of any charges or other similar such encumbrances on any real property (as defined in paragraph 8(2)(a) of the Second Order), including particulars of the specific interest that is so charged, together with the provision of bank or similar such statements covering the period 1st October 2010 until the date of this order in respect of any and all accounts of any borrowing secured against such real property;
1.2. Details of all of the said Respondent's bank accounts, whether or not they are in their own name and whether they are solely or jointly owned and whether the said Respondents and each of them are interested in them legally, beneficially or otherwise, together with the provision of bank or similar such statements covering the period 1st October 2010 until the date of this order in respect of any and all such accounts;
1.3. Sub-paragraphs 1.1 and 1.2 above apply also to those assets, liabilities, and bank or other accounts and statements in respect of
1.3.1. Prestige Properties Limited;
1.3.2. Prestige Property Developer UK Limited;
1.3.3. Prestige Property Developer UK Limited;
1.3.4. In & Out Developments Limited;
1.4. Full particulars as to how the said Respondents are funding the present litigation, including but not limited to the identification of the funder(s), the amount(s) that the said Respondents have spent and are proposing to spend, and the details of the bank account(s) from which funds are being transferred to the said Respondents' lawyers."
"And whereas a Freezing Order was made against the First, Second and Fourth Defendants by Mr Justice Arnold dated 9th May 2013 requiring those Defendants to provide certain information among other things ("the First Order")
And whereas a further Freezing Order was made against the First, Second and Fourth Defendants by Mr Justice Arnold dated 17th May 2013 requiring those Defendants to provide certain information among other things ("the Second Order)
And whereas an order was made against the First, Second and Fourth Defendants by Mr Justice Henderson dated 21st June 2013 debarring them from defending the proceedings unless they provide certain information as described in that order ("the Unless Order")
And whereas this matter is currently set down for trial in a window between 1st October 2013 and 31st October 2013
And whereas the court made an order by consent dated 9th August 2013 disposing of the Second Claimant's claim
It is declared that
1. the First, Second and Fourth Defendants have failed to comply with the Unless Order and are debarred from defending the First Claimant's claim;
And it is ordered that:
2. The Defence and Counterclaim filed on behalf of the First, Second and Fourth Defendants be struck out.
3. The determination of the remaining heads of relief claimed by the First Claimant as particularised in his Particulars of Claim be adjourned for a disposal hearing to take place in the current trial window, or at such earlier time as the court may list it upon the application of the First Claimant.
4. The First, Second and Fourth Defendants do pay the First Claimant's costs of and occasioned by the Application on the indemnity basis summarily assessed in the sum of £22,000.00."
(1) In the following paragraphs
(a) a 'relevant order' means a judgment or order of the court which requires the amount of money to be paid by one party to another to be decided by the court; and
(b) a 'disposal hearing' means a hearing in accordance with paragraph 12.4.
(2) A relevant order may have been obtained:
(a) by a judgment in default under Part 12;
(b) by a judgment on an admission under Part 14;
(c) on the striking out of a statement of case under Part 3;
(d) on a summary judgment application under Part 24;
(e) on the determination of a preliminary issue or on a trial as to liability; or
(f) at trial.
(3) A relevant order includes any order for the amount of a debt, damages or interest to be decided by the court (including an order for the taking of an account or the making of an inquiry as to any sum due, and any similar order), but does not include an order for the assessment of costs."
Pausing there, there was in this case no "relevant order". No order had yet been made which required an amount of money to be paid. As the order of Hildyard J recited, the heads of relief claimed by the First Claimant, Mr Thevarajah, required to be determined, and they went beyond mere payment of money.
The nature of a disposal hearing is further spelled out in PD26 paragraph 12.4:-
"(1) A disposal hearing is a hearing
(a) which will not normally last longer than 30 minutes, and
(b) at which the court will not normally hear oral evidence.
(2) At a disposal hearing the court may
(a) decide the amount payable under or in consequence of the relevant order and give judgment for that amount; or
(b) give directions as to the future conduct of the proceedings.
(3) If the claim has been allocated to the small claims track, or the court decides at the disposal hearing to allocate it to that track, the court may treat the disposal hearing as a final hearing in accordance with Part 27.
(4) Rule 32.6 applies to evidence at a disposal hearing unless the court directs otherwise.
(5) Except where the claim has been allocated to the small claims track, the court will not exercise its power under sub-paragraph (2)(a) unless any written evidence on which the claimant relies has been served on the defendant at least 3 days before the disposal hearing."
The cross reference to Rule 32.6 emphasises, if it is not already sufficiently clear, that a disposal hearing is not a trial. What was required in order to determine whether Mr Thevarajah was entitled to the relief claimed was a trial. Although we have no transcript of the hearing before Hildyard J, it appears that that was also his view. According to a note cited by the Respondents' counsel in their skeleton argument placed before the Deputy Judge, Hildyard J observed on that occasion that:-
"You need to prove your right with regards to anything that goes to the substance of the claim, you cannot seek judgment in default. That would not work."
"The Applicant seeks an order in the form attached for a declaration and entering judgment in the sum of £2,129,837.74 plus interest as against the D1, D2 and D4 (pursuant to CPR r.3.5(2)), specific performance of an agreement for the purchase of shares in D3 (pursuant to CPR Part 23), permission to rely upon expert evidence, assessed damages in the sum of £542,500 (pursuant to CPR Part 23), the continuation of two interim injunctions, and costs together with an order for a payment on account, together with any further directions as may be necessary.
The Applicant is entitled an order in these terms because D1, D2 and D4 have had their defence struck out and have been debarred from defending the claims against them."
Rule 3.5 (2) is of no application to this case, as we shall shortly see. Save that Part 23 is concerned with the making of applications, it contains nothing which would justify the court directing specific performance of an agreement without enquiring into the question whether the claimant thereto is entitled to such relief. Mr Thevarajah was not "entitled" to any of this relief simply because the Defendants had had their defences struck out and been debarred from defending the claims brought against them.
"It is declared that
(1) the First, Second and Fourth Defendants were liable to pay to the Claimant such sum as is necessary to allow the Claimant to discharge all of the Third Defendant's debts accrued as at the rate of this order (whether presently known or unknown), together with any sum falling due in the future (whether by way of a tax liability or otherwise) in respect of any sale or transfer of the Castle to the First, Second and Fourth Defendants, or to a person or entity nominated by them;
And it is ordered that:
1. The First, Second and Fourth Defendants shall by 4pm on 22nd January 2014
1.1. state and certify the number of shares in the Third Defendant that they have a legal and/or beneficial interest in; and
1.2. transfer to the Claimant all legal and beneficial interest that they have in any issued shares in the Third Defendant.
2. The register of members of the Third Defendant be rectified as necessary and as soon as practicable to give effect to the declarations in paragraphs (1) above, and pursuant to section 125(2) of the Companies Act 2006;
3. The Third Defendant do give notice in this order to the registrar of companies within 14 days of the date of this order, and pursuant to section 125(4)
4. The First, Second and Fourth defendants do pay the First Claimant the sum of £72,000 by 31st January 2014, together with interest in the sum of [£ ] and therefore amounting to a total of [£ ];
5. Save as otherwise provided by paragraph 6 below the First, Second and Fourth Defendants to pay the First Claimant the further sum of £2,057,837.741 by 4pm 31st January 2014;
1. For the purposes of the draft version of the Order: £1,993,823.42 (being the sum due and paid to the Bank on or around 6th December 2013 at the time of the refinancing) + £6,904.11 (being the interest due on the refinancing loan of £1,000,000 from 6th December 2013 to 17th January 2014) + £13,068.17 (being the interest due on the refinancing loan of £946,404.92 from 6th December 2013 to 17th January 2014) + £46,800 (being the rental income received from Carlton Leisure Ltd) -£2,757.96 (being the balance in the Third Defendant's bank account.)
6. In the event that the Defendants are able to procure an offer from the Bank of Cyprus ("the Bank") to restructure the Third Defendant's borrowing with the Bank by a proposed transfer of the property known as The Holloway Castle Public House, 392 Camden Road, London, N7 0SJ ("the Castle"), together with a transfer of a proportion of the said borrowing, to a person or entity nominated by the First, Second and Fourth Defendants, such that the Bank is prepared to reduce the sum due from the Third Defendant to it, the sum referred to in paragraph 5 above shall be reduced accordingly, provided that the Bank apply and give effect to such reduction by 4pm on 31st January 2014;
7. Upon payment of the entirety of the sums referred to in paragraphs 4 and 5 (and as varied by paragraph 6 if applicable), and provided such payments are made in their entirety before 4pm on 31st January 201, the Third Defendant shall transfer (and the Claimant shall caused the Third Defendant to transfer) the Castle to such person or entity as the First, Second and Fourth Defendants shall nominate as soon as practicable thereafter.
8. In the event that the entirety of the sums referred to in paragraphs 4 and 5 have not been paid by 4pm on 31st January 2014 then the Claimant shall be at liberty to sell the Castle for fair market price and to apply the proceeds of sale towards the sums dues from the First, Second and Fourth Defendants."
"Fourthly, we are troubled by the deputy judge's observation that even if the respondents remained debarred from defending the claim they would be "entitled at trial to require the Claimant to prove his claim, to cross-examine and make submissions" (see para 16 above). The cases to which he referred in that connection, namely Culla Park Ltd v Richards  EWHC 1687 and JSC BTA Bank v Ablyazov (No.8)  1 WLR 1331, do not appear to us necessarily to support so sweeping a proposition. This issue, however, will be a matter for decision by the judge who hears the trial; and, having put down a marker in relation to it, we think it better to say no more on the subject at this stage."
From that it appears to have seemed axiomatic to the Court of Appeal, as it had to Mr Sutcliffe, that notwithstanding the Order made by Hildyard J the matter had to proceed to trial.
"MR BAILEY: You will see there is a trial, or at least a final disposal hearing of some description occurring next week?
MR JUSTICE SALES: Yes, I was just slightly unclear what I was being asked to do today? Am I being asked to make a final order which obviates the need for that final hearing or are you looking forward to that final hearing being the occasion ---
MR BAILEY: Given where we find ourselves today and given the number of ancillary matters that your Lordship is going to be asked to deal with we are not anticipating that we are going to get to dealing with the matter substantively today. So we have in mind that that will be dealt with at a hearing of some description next week.
The primary question that I say your Lordship needs to consider today is, to put it in colloquial language, what are the rules of the game for the hearing next week. Your Lordship will appreciate that the defendants have been debarred from defending, and that they have also had their defence struck out.
MR JUSTICE SALES: Yes.
MR BAILEY: And there was some controversy as to what they can and cannot do. We say the position is remarkably straightforward, which is that they cannot do anything. They are not in a position to contest anything that we say; they are not entitled to participate. However, that does not mean, of course, I can have any order I want, I am going to have to demonstrate to the court on my pleadings and on my evidence that I am entitled to the relief that I seek. That is the primary issue for your Lordship."
" WHEREAS the First, Second and Fourth Defendants' application to strike out the Claimant's claim, alternatively for an order debarring the Claimant from relying upon documentary and further witness evidence, was abandoned during the course of submissions.
AND WHEREAS the First, Second and Fourth Defendants have had their defence struck out and have been debarred from defending pursuant to the order of Mr Justice Henderson dated 21st June 2013 AND WHEREAS the parties have all sought a determination as to the effect of that order at trial
AND WHEREAS an agreed note of judgment is appended to this Order
IT IS ORDERED that:
The First, Second and Fourth Defendants' application to vacate the final hearing listed in a 5-day window commencing 27th January 2014 ("the Final Hearing") be dismissed.
Each party shall be entitled to call expert evidence in respect of the valuation of the public houses referred to in the Particulars of Claim as the Devonshire and the Jester. The said Defendants shall file and serve a revised version of their expert report confined to those matters by 4pm on 27th January 2014.
At the Final Hearing the First, Second and Fourth Defendants:
shall not be permitted to participate in any matters of liability pleaded in the Claimant's Particulars of Claim save for assisting the court in understanding the Claimant's case if necessary;
shall have no right to take any steps to challenge any parts of the Claimant's claim as pleaded in his Particulars of Claim or evidence adduced in support thereof;
shall be permitted to participate fully in matters of quantum where such quantum is pleaded as damages to be assessed being the issue of the quantum of debts and liabilities of the Third Defendant and the market value of each of the Jester and the Devonshire.
The First, Second and Fourth Defendants shall file and serve a list of points of dispute pertaining to damages to be assessed where they take issue with the Claimant's case (within the scope permitted by this order) by 9am on Monday 27th January 2014.
Each party shall file and serve skeleton arguments by 12 noon on Tuesday 28th January 2014."
"The position that attained at the time that Henderson J made his order was this. The Particulars of Claim set out in considerable detail the nature of the agreements made between the Claimant and the Defendants, the alleged breach of the agreements and various torts said to be committed by them. In relation to two matters relevant for present purposes, the Claim as set out in the prayer at the end of the Particulars of Claim was for an order for damages to be assessed.
The first part of the case for damages to be assessed related to a public house called The Jewel. The agreement had been that the claimant would acquire full ownership and control via 100% ownership of a corporate vehicle, free from debt and encumbrances. In the event, it is claimed that The Jewel and related corporate vehicle have been subject to encumbrances and debt obligations which were substantial. The Claimant claims damages in an amount required to discharge the said debt obligations.
The other part of the case for damages to be assessed related to the agreement that the Claimant should acquire 50% ownership of each of the public houses called The Devonshire and The Jester. In relation to that part of the case, the Claimant acknowledges and accepts that specific performance would not be an appropriate form of relief, hence he advances a claim for damages for what was in substance a repudiation. The damages claimed relate to the extent to which the market value exceeds the price that he agreed to pay. As is clear, expert evidence is required of the market value in order for damages to be assessed on that part of the claim."
From that passage it is clear that Sales J had no difficulty in discerning from the Particulars of Claim that the agreement asserted was that Mr Thevarajah would acquire control of Prestige free from debt and encumbrances, and that insofar as release from the debt and encumbrances could not be achieved (sc by the parties themselves without the agreement of the Bank of Cyprus) Mr Thevarajah sought damages in an amount required to discharge the debt obligations. Only The Jewel was mentioned in this regard. That reflected the fact that from the outset the parties had proceeded upon the basis that The Castle formed no part of the deal and that both it and the debt associated with it would be transferred out of Prestige rather than assumed by Mr Thevarajah.
"Mr Bailey for the Claimant submitted that the Defendants have no right of participation at all in relation to liability. In my view that goes too far. If, for example, in relation to a judgment entered in default of defence (a position analogous to that achieved by the sanction in Henderson J's order) it later emerges that the trial judge had misunderstood the claim and granted excessive relief, that would provide grounds for an appeal, and the defendant would be entitled to bring and maintain such an appeal. That being so, the judge at a hearing at first instance faced with a claim for judgment to be entered in default would likewise potentially be assisted by submissions from counsel for the defendant directed solely to understanding the extent of a claim set out in the particulars of claim. To that limited extent, counsel for the Defendants in this case will have a right of participation in the further hearing in so far as it relates to the claim already set out in the pleading in the Particulars of Claim. I emphasise how limited that role is. It is confined to assisting the court in understanding the case pleaded, which the Defendants have been debarred from defending."
"This skeleton argument deals or attempts to deal with what remains of the trial of this action."
"Where the claimant makes an application for a default judgment, judgment shall be such judgment as it appears to the court that the claimant is entitled to on his statement of case."
The Deputy Judge did not have to ignore how the pleaded claims had been clearly understood in the Defence or in the correspondence. Curiously, at paragraph 16 of his judgment the Deputy Judge recorded that the Defence and Counterclaim had ceased to exist and had been omitted from the bundles before him, notwithstanding that earlier in the same paragraph he had referred to two passages contained in that pleading on which Mr Bailey had relied. Mr Davenport reminded us that the "Glossary" at Section E of Civil Procedure says that the meaning of the expression "Strike Out" is "the court ordering written material to be deleted so that it may no longer be relied upon". The status of the glossary is explained in CPR 2.2(1), which states that it "is a guide to the meaning of certain legal expressions used in the Rules, is not to be taken as giving those expressions any meaning in the Rules which they do not have in the law generally." At paragraph 16 (a) of his judgment the Deputy Judge also referred to the Defence and Counterclaim as having been "erased" and said that "any statement dependent for its vitality on the continued existence of the now erased Defence and Counterclaim cannot be invoked to supply, cure or support any claim not, or inadequately, advanced in the Particulars of Claim." I do not entirely understand the ambit of this approach but I do not agree with the notion that the Defence had for all purposes ceased to exist. What had happened is that the Respondents had been debarred from defending. To that extent the Defence could not be relied upon by the Respondents, but it would be absurd if the document could not be relied upon by the Claimant as indicating the ambit of the dispute. Were that not the case, matters which were never in issue because of admissions in the pleadings would suddenly become contentious, with the extraordinary and perverse effect that the burden on the claimant at trial would be increased. The obverse would equally be true- a defendant may by virtue of being debarred from defending avoid the consequences of his admissions, thereby casting upon the claimant a burden which may, in reliance upon the admission, have become more difficult or even impossible to discharge. I agree with Mr Smith's happy observation that "a defence will have left a lasting legacy on the statements of case as a whole. By virtue of what is said in a defence, the content of any reply, or the decision not to rely upon one, will have been affected. Further, if the defence indicates to a claimant that the parties are in agreement as to what they disagree about, it will impact upon any consideration of whether to amend the particulars of claim to clarify anything that might be said to have been unclear." It might also for example have been necessary to look at the Claimant's Reply and Defence to Counterclaim which would most likely be difficult to follow without resort to the pleading to which it was responsive.
"(1) This rule applies where
(a) the court makes an order which includes a term that the statement of case of a party shall be struck out if the party does not comply with the order; and
(b) the party against whom the order was made does not comply with it.
(2) A party may obtain judgment with costs by filing a request for judgment if
(a) the order referred to in paragraph (1)(a) relates to the whole of a statement of case; and
(b) where the party wishing to obtain judgment is the claimant, the claim is for
(i) a specified amount of money;
(ii) an amount of money to be decided by the court;
(iii) delivery of goods where the claim form gives the defendant the alternative of paying their value; or
(iv) any combination of these remedies.
(3) Where judgment is obtained under this rule in a case to which paragraph (2)(b)(iii) applies, it will be judgment requiring the defendant to deliver goods, or (if the defendant does not do so) pay the value of the goods as decided by the court (less any payments made).
(4) The request must state that the right to enter judgment has arisen because the court's order has not been complied with.
(5) A party must make an application in accordance with Part 23 if they wish to obtain judgment under this rule in a case to which paragraph (2) does not apply."
As already noted, this case does not fall within rule 3.5 (2) as the relief claimed went far beyond that therein stated. It is true that rule 3.5 (5) mandates an application under Part 23 if a party wishes to "obtain" judgment under this rule in a case to which paragraph (2) does not apply. But a judgment "under this rule" is a judgment without trial. Rightly, it was here recognised albeit not perhaps consistently that the Claimant had to prove his case and his entitlement to the relief sought.
11. In October 2011, and after a series of meetings between the First Claimant on the one hand and the First and Fourth Defendants (acting on behalf of all the Defendants) on the other, an agreement was reached ("the Agreement") by which the First Claimant was to acquire an interest in certain public houses as particularised below. The interest was to be indirect in that it was envisaged that the First Claimant would acquire shares in certain corporate entities which in turn owed the said public houses.
13.The terms of Agreement were recorded in a document entitled "Memorandum of Understanding" ("the MoU"). The MoU was drawn up by Mr Sharvanandan Arnold of BBK Partnership (Accountants) on or shortly before 17 October 2011 following a meeting he had had with the First and Fourth Defendants and circulated to the First Claimant and to at least the Fourth Defendant. The named parties to the MoU were the First and Second defendant "And their companies" on the one hand (defined therein as "the Sellers") and the First Claimant "And his Companies" on the other (defined therein as "the Buyer").
14. The terms of the Agreement included the following:
14.1. The First Claimant would purchase the entire issued share capital in the Third Defendant which at that time owned two public houses being the Jewel and the Castle;
14.2. The Castle would be extricated from the Third Defendant either by sale to a third party or otherwise transferred to one of the companies used as a vehicle by the First and/or Second Defendant , or to the First and/or Second Defendants themselves;
14.3. The purchase price for the said shares in the Third Defendant would be £1,250,000;
14.4. The First Claimant would purchase 50% of the issued share capital in a company to be formed for the purpose to be called "John and Tavi Ltd ("JTL"). At the same time the Sellers would cause the leasehold interest in a public house known as The Devonshire Castle, 67 Axminster Road, Hornsey, London N7 6BP ("the Devonshire") to be transferred from Prestige Properties Limited to JTL (the said lease being a term of 999 years commencing 1st January 2008);
14.5. Further, the freehold interest in the Devonshire would be transferred to a new company to be formed for the purpose to be called "Company ABC Ltd" ("ABCL") with the First Claimant to have transferred to him 50% of the issued share capital. (As at October 2011 the said freehold interest was then owned by the First Defendant.)
14.6. The purchase price for the said shares in JTL would be £750,000;
14.7. By way of further consideration the First Claimant would transfer to the First, Second and Fourth Defendants a leasehold business interest known as Pizzeria Romana.
17. By email dated 2nd December 2011 the Fourth Defendant provided the First Claimant with bank account details in respect of the Third Defendant requesting further payment in the sum of £280,000. The Fourth Defendant stated that this was a " request by boc, to agree to what we proposed to them in splitting the jewel/castle". By this the Fourth Defendant was acknowledging that the Bank of Cyprus ("the Bank") had a charge on each of the Jewel and the Castle and that monies needed to be paid to reduce that borrowing if the Bank were to server the loan and separate their security into distinct loans and charges to allow the Castle to be transferred out of the Third Defendant as provided for in the Agreement.
18. By email dated 15th December 2011 the Applicant by his then solicitor, Mr Raveenderan of K Ravi Solicitors, sought to confirm the security position in respect of the Jewel and the Castle with the Bank. By this stage it was envisaged that part of the consideration in respect of the Jewel would be paid by way of the First Claimant taking over responsibility for the borrowing secured on the Jewel, save that it would need to be determined what proportion of the total sum lent to the Third Defendant by the Bank and secured on the Jewel and the Castle jointly would be left secured on the Jewel alone.
22. Sometime around the beginning of February 2012, and in any event by 3rd February 2012, the First, Second and Fourth Defendants, who were in need of further funding, offered the First Claimant the opportunity to acquire a 50% indirect interest in a property known as The Jester Public House, Cockfosters, London EN4 9HG ("the Jester"). The interest was to be indirect in that the First Claimant was to acquire 50% of the issued share capital in a corporate vehicle that would own the property ("the Jester Corporate Vehicle"). The purchase price of the said shares was £500,000.
23. Accordingly the Agreement was varied so as to include the acquisition in respect of the Jester as aforesaid. In the alternative the agreement in respect of the Jester amounted to a separate stand alone agreement. Thus the total sum due to be paid by the First Claimant was such amount less than £2,500,000 that reflected the size of the load secured on the Jewel (the £2,500,000 being made up of £1,250,000 in respect of the Jewel, £750,000 in respect of the Devonshire and £500,000 in respect of the Jester). Thus if the Jewel were to have had £1,000,000 secured on it, the total cash sum to be paid would have been £1,500,000. The exact sum secured on the Jewel would be a function of both the total balance of the loan and the manner in which it was severed, one part being secured on the Jewel and the other part being secured on the Castle.
26. The First Claimant was given the keys to the Jewel at the end of February 2012. This was on the basis of a provisional agreement from the Bank that the First Claimant would be given a loan from the Bank of Cyprus once the existing borrowings had been split between the Jewel and the Castle.
27. In February 2012 the First Claimant was offered a loan by the Bank of Cyprus. The balance of approximately £1.8 million then secured on the Jewel and the Castle would be split with £800,000 secured on the Jewel alone. The interest rate was to be 7% per annum and there was also to be an exit fee.
36. By email on 17th July 2012 at 11.41 the First Defendant (on behalf of himself, the Second and Fourth Defendants) made an offer of a unilateral contract ("the Second Collateral Contract") the terms of which were that if the First Claimant were to pay a further £280,000 to YVA Solicitors to add to the £220,000 paid to them on 30th May 2012 (such that they would then be holding £500,000), such total sum to be held to the First Claimant's account, then the First, Second and Fourth would procure that the First Claimant would become the sole director of the Third Defendant. Upon Mr Arnold providing confirmation of the same, the said £500,000 would be released from YVA Solicitors and paid to the Bank, save that the proposed deed of trust also required signature.
37. It is notable that the First Defendant recorded in the same email that the said deed of trust "becomes void when the monies are [paid anyway" (sic.), reflecting that the First Defendant considered that the First Claimant would have parted with sufficient cash, or approximately sufficient cash, to complete the Agreement. The First Claimant still needed to take over such part of the lending that would ultimately remain secured on the Jewel after the severing of the loan by the Bank.
53. With regard to the breakdown of all trust and confidence as between the parties, the First Claimant concedes that specific performance of the Agreement with regards to those aspects concerning the Devonshire and the Jester is impractical and that joint and equal ownership of one or more corporate vehicles with the First, Second and Fourth Defendants would likely result in further litigation in the form of minority shareholder relief or otherwise. Accordingly the First Claimant confines its claim to specific performance to those aspects of the Agreement pertaining to the Jewel.
54. Further to paragraph 52, the First Claimant claims the sum of £322,000 representing the difference between the £1,572,000 paid and the £1,250,000 being the cash purchase price in respect of the Jewel (upon the transfer of Pizzeria Romano to the First, Second and Fourth Defendants), or alternatively the sum of £72,000 (without the transfer of Pizzeria Romano, the parties ascribing a value of £250,000 to the pizzeria and the associated leasehold.)
56. In the alternative to paragraphs 52 to 55 and in the event the court does not order specific performance of the Agreement such that the First Claimant is required to return the shares in the Third Defendant, the First Claimant claims damages in respect of the Agreement for breach of contract as follows:
56.1. £1,572,000 being the total sum in cash paid by the First Claim to the First, Second and Fourth Defendants;
56.2. A sum representing the increase in the value of the Jewel as a result of the improvement work done on the property;
56.3 A sum representing the loss in the value of the business being operated from the Jewel;
56.4 The First Claimant claims the sums sought in paragraph 56.2 and 56.3 above to be quantified by way of an assessment of damages, albeit the First Claimant maintains this sum is at least £600,000.
57. In the alternative, if the court finds that there is no contract as between the First Claimant and the First, Second and Fourth defendants, the First Claimant claims the sum of £1,572,000 as money had and received, such sum being held on constructive trust by each of the Defendants as aforesaid. The First Claimant reserves its right to provide further voluntary particulars of the said trust after disclosure.
60. By making an offer to the First Claimant in the terms of the Agreement and by entering into the Agreement, or alternatively if the court finds there was no contract then otherwise by the facts and matters pleaded at paragraphs 10 to 14 above, the First and Fourth Defendants (acting on behalf of themselves and the Second Defendant) represented to the First Claimant that they were in a position to sell him the Jewel, or alternatively the entire issued share capital of a company owning the Jewel, free from encumbrance. That representation was false in that the said Defendants had already contracted with the Second Claimant by the Guarantee Agreement to give the Second Claimant a 15% interest in the Jewel. Further, the First Claimant relies upon the said Defendants' failure to disclose the facts and matters pleaded at paragraphs 5 and 6 above. The said representations induced the First Claimant to part with £1,572,000 and to undertake the works as aforesaid to the Jewel. Further, the said representation was fraudulently in that the First, Second and Fourth Defendants knew it to be false otherwise had no honest belief in its truth."
"The relief to which Mr Thevarjah is entitled as regards the part of the agreement relating to "The Jewel" is:
a) An order that the Defendants transfer to Mr Thevarajah the remaining 50% of the shares in PPD.
b) An order that Mr Theverajah procure the transfer of "The Castle" by PPD to the Defendants or such other person as they may direct at the same time as the transfer of the shares under (a).
c) Repayment of the £72,000."
To say that Mr Thevarajah was "entitled" to this relief implies that he had asked for it. He had not asked for the shares in Prestige to be transferred to him without a corresponding payment from the First, Second and Fourth Respondents to reflect the liabilities which he was thereby assuming. He had not asked to be required without compensatory payment to transfer The Castle out of Prestige. To require him so to do without requiring the First, Second and Fourth Respondents to make a compensatory payment meant that not only did Mr Thevarajah acquire an unintended liability but that he also lost the asset of Prestige to which it related and on which it was secured. The Deputy Judge recognised the consequences. He set them out at paragraph 20 of his judgment. They were, he said, the:-
"unavoidable consequences of asking the court to order implementation of an arrangement lacking (as pleaded, and perhaps in fact) agreement of an important element."
"(a) The First Claimant would purchase the entire issued share capital in the Third Defendant at which time the assets of which would consist of The Jewel only.
(b) The Castle would be transferred out of the Third Defendant at the same time as or prior to the sale of the share capital of the Third Defendant to the First Claimant.
(c) The purchase price for the said shares in the Third Defendant would be £2,500,000 made up of £1,700,000 in cash and the First Claimant taking on the Third Defendant's borrowings on The Jewel with the Bank in the sum of £830,000."
To like effect are the following paragraphs:-
"21. Save that it is admitted that at this stage it was envisaged that part of the consideration in respect of The Jewel would be paid by way of the First Claimant taking over the responsibility for the borrowing secured on the Jewel (for the avoidance of doubt, it is the First, Second and Fourth Defendant's case that this was always the intention of the parties),
50. It is admitted and averred that it was always agreed between the parties that the purchase of the Jewel by the First Claimant was conditional upon him taking over the liability of the £800,000 loan on The Jewel."
(1) Their letter dated 23 May 2013: "It is not nor has it ever been disputed that the Holloway Castle did not form any part of the deal between the parties If your client is concerned about specific performance of the proposed deal there is no reason why this element cannot be dealt with now with our client remaining willing to take on the circa £1 million borrowing associated with The Holloway Castle thereby reducing the Company's exposure to the Bank of Cyprus."
(2) Their letter dated 28 June 2013: "The agreement envisaged your client retaining within the Company "The Jewel" and £830,000 of borrowing associated with it (for the purpose of the agreement) and our clients would transfer the Holloway Castle out of the Company together with the £1,030,000 borrowing associated with it."
(3) Their letter dated 2 December 2013: "As for the transfer of The Holloway Castle out of the Company our clients would be prepared, subject to contract, for The Holloway Castle to be transferred to them with £1,030,000 debt attached to it "
1. "The First, Second and Fourth Respondents shall by ..
1.1. state and certify the number of shares in the Third Respondent that they have a legal and/or beneficial interest in; and
1.2. transfer to the Appellant all legal and beneficial interest that they have in any issued shares in the Third Respondent.
2. Save as otherwise provided by paragraph 3 below the First, Second and Fourth Respondents do pay the First Appellant the sum of £2,204,976.40 together with interest at 8% from 4th February 2015 pursuant to the Judgments Act 1838 (such sum being further to the sum of £72,000 ordered to be paid by paragraph 3 of the order of Mr D.Donaldson QC dated 21st March 2014);
3. In the event that the Respondents are able to procure an offer from the Bank of Cyprus ("the Bank") to restructure the Third Respondent's borrowing with the Bank by a proposed transfer of the property known as The Holloway Castle Public House, 392 Camden Road, London N7 0SJ ("the Castle"), together with a transfer of a proportion of the said borrowing, to a person or entity nominated by the First, Second and Fourth Respondents, such that the Bank is prepared to reduce the sum due from the Third Respondent to it, the sum referred to in paragraph 2 above shall be reduced by the amount of the proportion of the borrowing transferred accordingly, provided that the Bank apply and give effect to such reduction by ..
4. Upon payment of the entirety of the sum referred to in paragraph 2 (and as varied by paragraph 3 if applicable), and provided such payments are made in their entirety before .., the Third Respondent shall transfer (and the Appellant shall caused the Third Respondent to transfer) the Castle to such person or entity as the First, Second and Fourth Respondents shall nominate as soon as practicable thereafter.
5. In the event that the entirety of the sum referred to in paragraph 2 has not been paid by .. then the Appellant shall be at liberty to sell the Castle for fair market price and to apply the proceeds of sale towards the sums due from the First, Second and Fourth Respondents.
6. The freezing order of Mr D.Donaldson QC dated 21st March 2014, and continued by order of Lord Justice Richards dated 10th April 2014 shall remain in effect until all sums due pursuant to (i) this order, (ii) the order of this court dated 13th December 2014, (iii) the order of Sales J dated 23rd January 2015, and (iv) paragraph 6 of the order of Mr D. Donaldson QC dated 21st March 2014 (which for the avoidance of doubt includes those sums due pursuant to paragraph 7 below) have been paid to the Appellant and until the Appellant has acknowledged that all such sums have been paid, or until further order of the court;
Costs of the Part 8 proceedings
Mr Justice Newey:
Lord Justice Richards: